What does the duty of care principle require of financial advisers in relation to loans?

• A. Always recommend the highest value loan product.
• B. Advisers must act in clients' best interests, provide suitable recommendations, and disclose conflicts of interest.
• C. Avoid disclosure of conflicts of interest.
• D. Only provide generic information without personalization.

Answer: (B)

Duty of care means you put the client's interests first when recommending loans. It requires three things: acting in the client's best interests, delivering recommendations that are suitable for their financial situation, goals, and needs, and being transparent about any conflicts of interest that could influence the advice. The best-interests standard ensures the loan chosen aligns with the client’s objectives and risk tolerance rather than the adviser’s incentives. Suitability means you assess the borrower’s income, expenses, existing debt, loan features, and term to ensure the product fits. Disclosure of conflicts of interest is essential so the client can evaluate whether any incentive, commission, or affiliation might sway the recommendation. The other options miss the duty in important ways: pushing the highest value loan may ignore affordability and fit; avoiding disclosure undermines trust and transparency; providing only generic information ignores the need for personalized, suitable guidance.